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Promissory Notes Explained
- 1. LESSON 20-1 Promissory Notes CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
- 2. 2 USES OF PROMISSORY NOTES 1. Number 4. Time of a note page 589 2. Date of a note 3. Payee 5. Principle 8. Maker 6. Interest rate CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7. Maturity date LESSON 20-1
- 3. 3 INTEREST ON PROMISSORY NOTES page 590 Interest for One Year Principal × Interest Rate $20,000.00 × 6% × Time in Years = Interest for One Year × 1 = $1,200.00 Interest for Fraction of Year Principal × Interest Rate $20,000.00 × 6% Time as × = Fraction of Year 90 × 360 CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning = Interest for Fraction of Year $300.00 LESSON 20-1
- 4. 4 INTEREST ON PROMISSORY NOTES page 590 Maturity Value Principal + Interest = Maturity Value $20,000.00 + $300.00 = $20,300.00 CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 20-1
- 5. MATURITY DATE OF PROMISSORY NOTES 5 page 591 May 18, 90-Day Note May18–May 31 13 days June 30 days July 31 days August 1–August 16 1 16 days Total 2 3 4 90 days 1. Subtract the date of the note from the number of days in the first month. 2. Add 30 days for June. 3. Add 31 days for July. 4. Add only 16 days in August. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 20-1
- 6. 6 TERMS REVIEW number of a note date of a note payee of a note time of a note principal of a note interest rate of a note maturity date of a note page 592 maker of a note promissory note creditor notes payable interest maturity value CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 20-1
- 7. 6 TERMS REVIEW number of a note date of a note payee of a note time of a note principal of a note interest rate of a note maturity date of a note page 592 maker of a note promissory note creditor notes payable interest maturity value CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 20-1